Jumps in option prices and their determinants : real-time evidence from the E-mini S&P 500 option market

George Kapetanios, Michael Neumann and George Skiadopoulos

We study the real-time characteristics and drivers of jumps in option prices. To this end, we employ high frequency data from the 24-hour E-mini S&P 500 options market. We find that option prices do not jump simultaneously across strikes and maturities and are uncorrelated with jumps in the underlying futures price. 14% to 28% of detected option price jumps occur around scheduled news releases. However, it is illiquidity rather than the news content that drives jumps. Evidence suggests that option traders increase bid-ask spreads to account for trading against investors who are skilled processors of public releases.

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Year of publication:	2014
Authors:	Kapetanios, George ; Neumann, Michael ; Skiadopoulos, George
Publisher:	London : School of Economics and Finance
Subject:	Asymmetric information \| Co-jumps \| Limit order markets \| Liquidity \| Option Markets \| News announcements \| Optionsgeschäft \| Option trading \| Asymmetrische Information \| Optionspreistheorie \| Option pricing theory \| Ankündigungseffekt \| Announcement effect \| Volatilität \| Volatility \| Derivat \| Derivative \| Index-Futures \| Index futures \| Schätzung \| Estimation